ESG Spotlight: Sustainable is Fashionable, Lululemon Leads the Way

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The apparel sector has long been known for its resource and labor intensity. Supply chains stretch around the globe, and production often happens in more than one country. Some companies have sought to improve the narrative for themselves such as Nike and Hanes who we covered in the past. We explored one of our ESG platform’s Top Movers, Lululemon (LULU:CA), grabbed headlines, along with Samsonite (1910:LU) and Puma (PUM:DE) for their sustainability efforts.

ESG Safeguard Platform: Top Movers—Textiles and Apparel Sector, Past 14 Days

Lululemon (LULU:CA)

The iconic brand made big moves this week in making their supply chain more sustainable. Lululemon has entered a partnership with Genomatica, a San Diego based bio-engineering company. The goal of the partnership is to replace traditional synthetic nylon with a plant-based nylon that has a much lower environmental impact. Synthetic nylon is made from fossil fuels and has a large carbon footprint.

Genomatica has a proven track record of helping companies replace synthetic materials with bio-based products and have worked with Cargill and BASF to this end. Lululemon is also working with the company LanzaTech to develop sustainable leather produced from mushrooms. These initiatives will pay dividends toward the company achieving their goal of 100% sustainable materials by 2030, and could help drive down production costs.

Samsonite (1910:LU) and Puma (PUM:DE)

Elsewhere in the Textile and Apparel industry, other companies have been making strides that surfaced on our ESG platform. The popular luggage company Samsonite (1910:LU), has launched new product lines made from recycled materials. This information was revealed last week in a financial statement from the company indicating that Samsonite finds this to be financially material and could lead to cost savings in their supply chain.

Puma (PUM:DE), an athletic wear company similar to Lululemon, has also taken steps towards a more sustainable future. The company is using a process that they call “Dope Dye” that they say significantly reduces water consumption during the manufacturing process. As news of droughts around the world continues to grab headlines, increased emphasis on water use could be in the near future for all industries.

Vietnam Supply Chain

Vietnam is a major production center in the Textile and Apparel industry and many companies have operations based there. Unfortunately, the country was hard hit by COVID, and was flagged as an area of concern on our platform for a handful of firms in the industry.

The situation has gotten so dire that some companies, including Nike (NKE), have penned a letter to President Biden asking for vaccine support in Vietnam. The letter is concerned that factory stoppages there will have drastic effects on the sector and the U.S. economy down the line. Some reports say that migrant workers from urban areas in Vietnam have moved back to the countryside to avoid the outbreak, perhaps showing that this may be more than a temporary lull in production. This situation shows the importance of insulating supply chains from unexpected occurrences.

Winds of Change

Over a year into the pandemic and COVID is still disrupting supply chains around the globe. Some companies like Lululemon, Samsonite, and Puma have taken measures to boost production efficiency and conserve natural resources. Other companies like Nike, who has been a leader in this space for a while, are concerned about their supply chains due to the COVID outbreak in Vietnam. The Textile and Apparel industry is a big consumer of resources, mainly water and fossil fuels. Companies using less of these resources not only helps the planet, but is also good for the bottom line by reducing input costs.

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